Benefits Revolution

In this issue starting on page 22, several Southeast-based brokers talk about how dramatically the benefits brokerage market is changing and what they are doing to capitalize on it and grow with it.

The benefits market is clearly being driven by costs. Employers are shifting more health costs to employees, who naturally are now themselves looking for ways to rein in their share of the costs.

But the market is also being shaped by the costs of serving this market. The brokers in our story have the resources needed and are investing in new infrastructure, analytics and personnel to meet the needs of employers and their employees who are so concerned about the cost of health care.

They are adding voluntary products to help fill the gaps created by reduced benefit plans and high deductibles and to meet employees’ desire for wellness and savings account options.

It helps that they are good-sized brokerages, of course. Smaller brokers would be hard-pressed to make these investments, especially as insurers reduce commissions.

It may be in their own self-interest to argue as they do that P/C agencies that only “dabble” in benefits will find it difficult to succeed in today’s marketplace. They say that when it comes to the employee benefits business, agencies must decide to be all in, or get out.

The strategy is not without some risk. While picking up a P/C client’s benefits business can help cement a big account, it can also mean more opportunities to mess up and potentially lose an entire account.

Size and resources aside, these brokers are doing what independent agents and brokers have always done for their commercial clients– going beyond policy placement to offering true value-added services.

To help them better deliver and also pay for the expertise they are delivering, these brokers are freeing themselves from the tradition of commissions and the conflicts those can invite. They are increasingly charging employers fees for their services and getting these employers to pay them.

These brokers may or may not approve of federal health care reforms, medical loss ratios or insurers reducing services and commissions, but they are not letting either the government or health insurers determine their fate.

Mike Sullivan of Digital Insurance sums up today’s benefits brokerage business this way:

“We’re talking about almost a cultural revolution in how we think about how we add value. For most people, it’s an accurate spreadsheet at the end of the year with four carriers across the top and a bunch of pricing and planned assigned features. But honestly, any agency that thinks they’re going to be doing that in the benefit space five years from now, it’s just not going to happen… and getting paid for it? Not going to happen.”